Should I Buy Deere & Company (DE)? Finance YouTuber Analysis

The YouTuber suggests looking at Deere & Company as part of the 'Halo theme' in the industrials sector. This implies a belief in its stability and resilience against AI-driven market volatility, aligning with the broader strategy of investing in companies with physical assets and real-world demand.

“Elsewhere in this Halo theme, I'd also be looking at Lionel Basil, ticker LYB, and Eolab, ticker ECL, in the material sector, as well as Deer, ticker DE, and Loheed Martin, LMT, in the industrials.”

The analyst advises avoiding Deere & Company shares for now, despite its strong agricultural equipment renewal cycle. He is concerned about the potential negative impact on its dealer network and future sales growth following the company's recent policy change allowing owners to fix their own equipment, which could reduce opportunities for dealers to upsell new units.

“I would wait for the next couple of quarters to see how that plays out I'd have to give the advantage to Caterpillar just on that.”

The analyst recommends buying Deer and Company on any price pullback, citing a multi-year equipment upgrade cycle driven by the aging farm equipment fleet and the company's leadership in autonomous tractor technology. Despite its current valuation, its strong operating margins and market share gains support long-term growth.

“I would be a buyer again at any pullback in price. That equipment upgrade cycle is a years-long phenomenon and it's going to continue to boost this best of breed stock.”

The YouTuber recommends Deere & Company for its strong position in agricultural equipment and diversification into construction. He anticipates supernormal growth driven by an upcoming equipment renewal cycle due to aging farm machinery and Deere's leadership in autonomous farming technology, which will boost profitability for operators.

“More importantly, Deere is leading a revolution in autonomous tractor and farm equipment. Upgrading those old driver models to the new technology will drive a surge in profitability for those large operators and is well worth the cost of the new equipment.”

Deere and Company is highlighted as an outlier with strong expected sales and earnings growth for 2022, driven by positive fundamentals in the agricultural sector, particularly higher crop prices. Despite a relatively high valuation, the underlying economic conditions support the stock.

“full sale full year sales and earnings are expected about 20 higher for 2022 uh and any positive guidance from management could help boost these shares uh the fundamentals and the underlying economics for the agricultural space especially with higher crop prices very positive”

The analyst believes Deere & Company is a high-quality company with strong fundamentals, including consistent revenue and earnings growth, robust free cash flow, and low debt. However, he finds the current valuation to be slightly ahead of itself, making it not well-priced for an immediate buy. He would consider it an interesting opportunity if the stock price drops below $340 per share, which would provide a sufficient margin of safety and a higher internal rate of return.

“I think this is a stock that you set aside you watch and you wait for the right price and then you can buy it and you have a great stock for a long long time.”

The YouTuber considers John Deere an 'evergreen' stock with long-term potential, citing its heavy investment in agricultural robotics like autonomous tractors and robotic weeders. They argue that farming will become increasingly important with global population growth, and John Deere's innovations reduce environmental impact and free up farmers.

“This is a stock that I refer to as an evergreen because it's always going to have a place in my portfolio because it will have forever long-term potential”

The YouTuber identifies John Deere as a market leader in agricultural machinery, well-positioned to capitalize on AI and automation in farming due to its scale, clear strategic focus on digital solutions, and significant R&D investment. However, he notes that the stock is currently highly valued compared to its peers, suggesting a neutral stance until further valuation analysis.

“John Deere scheint aber auch gleichzeitig gedacht besten Positionen in diesem Markt zu sein diese Chancen wirklich zu ergreifen was aber auch zur Wahrheit gehört ist dass John Deere auch im Marktvergleich die gerade am teuersten bewertete Aktie ist basiert auf aktuellen gewinnen erwarteten Gewinn und Cashflows”